Philippine economy contracts for the first time since 1998

The Philippine economy contracted by 0.2% in the first quarter of 2020, the weakest pace in at least two decades, the Philippine Statistics Authority (PSA) reported Thursday.

“This is the first contraction in Philippine GDP (gross domestic product) since 1998,” National Statistician Claire Dennis Mapa said.

A negative GDP growth was last seen in 1998, when the full year economic performance contracted by 0.5% during the 1997-1998 Asian Financial Crisis, coupled with the El Nino situation during the period.

The latest reading compares with the 6.7% recorded in the fourth quarter of 2019, and the 5.7% in the first quarter last year.

"Our country has faced significant socio-economic risks and shocks during the first quarter of 2020, all totally unexpected," Acting Socioeconomic Planning Secretary Karl Kendrick Chua said in the same briefing.

Among the factors cited by Chua are the eruption of the Taal volcano in January, the decline in tourism and trade due to the coronavirus disease 2019 (COVID-19) pandemic in February, and the enhanced community quarantine (ECQ) in March.

Metro Manila, along with several "high-risk" areas, has been on lockdown since March 17, with the enhanced community quarantine in the area extended twice until May 15.

"Containing the spread of the virus and saving hundreds of thousands of lives through the imposition of the ECQ has come at great cost to the Philippine economy," said Chua.

"Our economic growth is showing weaker performance compared to the past two decades. Even so, our priorities are clear: to protect lives and health of our people," he added.

On the demand side, household consumption slowed by 0.2% as almost all items posted weaker growth except for household spending on health which grew by 11.5%, faster than the 6.9% in the last quarter of 2019.

Government spending also grew by 7.1%, an increase from 6.4% the same quarter last year albeit slower than the 17% in the fourth quarter last year.

"On the supply side, all major sectors of the economy posted weaker growth as only those that provide essential goods and services were allowed to operate during the ECQ," said Chua.

The services sector posted a growth of 1.4%, while the industry sector declined by 3.0% and the agriculture sector down by 0.4%.

"These are extraordinarily trying times and the road ahead of us continues to be challenging and uncertain. Bear in mind that this crisis, like others before it, shall also pass, especially because we are working together as a nation," Chua said.

"All these give us hope that the Filipino nation can rise above this temporary setback, and the Philippine economy can end the year with a respectable performance," he added.

Contract further

In the same briefing, Chua hinted that the Philippine economy is likely to contract further in the second quarter of the year given the extension of ECQ.

"The first quarter, I think, is still respectable given the very difficult environment that we are in. Second quarter might be worse," he said.

"Well, second quarter as I mentioned, will be difficult because we saw the full-month extension of the ECQ (enhanced community quarantine) in April," he added. — KBK/RSJ, GMA News